Debating the Impact of Corporate Tax Rate Changes on Working Families
In recent political discourse, the topic of corporate taxation has taken center stage, with President Biden and Senator Bernie Sanders advocating for increased taxes on large corporations to support working families. However, this stance has been met with criticism from various economic researchers who argue that raising the corporate tax rate could have unintended negative consequences for the very people it aims to help.
Contrary to the proposed tax hikes, evidence from the period following the 2017 tax cuts indicates that a lower corporate tax rate may actually benefit workers. Post-enactment data showed a significant drop in unemployment rates to a historic low of 3.5%, coupled with a doubling in real wage growth. A survey by the Business Roundtable highlighted that millions of workers advanced into middle-class wage jobs during this time.
Despite these findings, there remains a push for higher corporate taxes. Yet, studies suggest that up to 70% of the burden from increased inc taxes would be shouldered by workers, with potential job and income losses. The Federal Reserve Board warns of “uniformly harmful” outcomes for employees, while the National Bureau of Economic Research (NBER) predicts that consumers would face higher prices as a result of corporate tax hikes.
The implications extend beyond wages and prices; working families could also see an uptick in their own tax liabilities. Research indicates that a majority of taxpayers, especially those earning under $100,000 annually, would be affected by a rise in corporate tax return rates through impacts on pensions and retirement savings. The Treasury Department estimates that a significant portion of the increased tax burden would fall on middle and lower-income earners.
Given the potential repercussions, including dampened investment and economic growth, experts are questioning the rationale behind the push for higher corporate taxes. The Cyprus tax advantages, for instance, demonstrate how competitive tax policies can foster economic activity without disproportionately affecting workers. Cyprus’s favorable tax on interest income and other fiscal policies serve as examples that some argue the U.S. should consider.
In light of these debates, income tax companies and policymakers are closely monitoring the dialogue around inc taxes, as any changes could have far-reaching effects on the economy and the livelihoods of American families.
